Glamorous metropolises in the U.S., especially New York City and Miami, are becoming homes away from home for wealthy Russians who used to keep their fortunes in Cyprus.
Russian oligarchs began transferring their money, which comprises about 30 percent of Cypriot bank deposits, out of the tiny euro zone member as the island nation's financial system approached the breaking point. Finance Minister Michael Sarris said banks were suffering "substantial outflows" for weeks before the meltdown.
Over the past six months to a year, large sums of Russian cash from individual investors have been flowing into New York apartments and condominiums, according to investment bankers, lawyers and wealth advisers in those areas.
"Many of our clients had a heads-up on this issue," a New York real estate lawyer who advises wealthy Russians, Ed Mermelstein, told the New York Times. "Cyprus had started having the conversations about what it was intending, and that's been going on for half a year."
With interest rates at record lows, investments in commercial real estate, shopping malls, hotels and condos are proving more beneficial than savings accounts for investors.
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Investments ranging from $5 million to $25 million have gone up substantially, according to Mermelstein. However, tracking Russian money is difficult. Cyprus's central bank estimated Russian deposits at €10 billion ($12.8 billion) maximum, while Moody's said Russian businesses alone probably held €19 billion ($24.3 billion) in the banks.
Capital Economics' latest Emerging Europe Update report states that the exact size of Russian deposits in Cyprus is still uncertain and deposits will be taxed only in the two largest banks -- the Bank of Cyprus and Laiki Bank, which is now set to close and be absorbed into the former.
"Estimates of the size of Russian deposits in Cyprus range from as low as €5-10 billion (by the Cypriot Central Bank governor) to as high as €25 billion (by Moody's). And it is likely that that at least some of these deposits will lie outside of the two main banks affected by the bailout. But even if all Russian deposits are at the two main banks and assuming that the levy is set at 40 percent, the total cost to depositors would be in the range of €2-10billion."